Firm-level political risk and labor performance

This study examines how firm-level political risk relates to labor performance, measured as the ratio of the total of net income and labor cost to the number of employees. Using a sample of 9508 firm-year observations consisting of U.S. firms during the years 2002-2021, we find a significant and negative relation between political risk and labor performance. Our empirical tests show that after controlling for other factors, firms facing a higher level of political risk demonstrate lower labor performance, highlighting the negative impact of political risk on firm behavior and outcomes.